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Exam 14: Monopoly

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Question 121

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When a monopolist increases the number of units it sells, there are two effects on revenue. They are the

A) demand effect and the supply effect.
B) competition effect and the cost effect.
C) competitive effect and the monopoly effect.
D) output effect and the price effect.

E) C) and D)
F) B) and C)

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Question 122

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Table 15-5 A monopolist faces the following demand curve: -Refer to Table 15-5. The monopolist has total fixed costs of $60 and has a constant marginal cost of $15. What is the profit-maximizing price?

A) $4
B) $39
C) $36
D) $42

E) None of the above
F) A) and B)

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Question 123

Multiple Choice

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Which of the following would be most likely to have monopoly power?

Table 15-22 -Refer to Table 15-22. The marginal revenue, when the quantity changes from 30 to 40 units, is

Figure 15-1 -Refer to Figure 15-1. Considering the relationship between average total cost and marginal cost, the marginal cost curve for this firm

Figure 15-23 -Refer to Figure 15-23. If a regulator requires the firm to charge a marginal cost price, what price will the firm charge?

Table 15-6 A monopolist faces the following demand curve: -Refer to Table 15-6. If the monopolist has a constant marginal cost for her product equal to $7, what is her profit- maximizing price?

Which of the following is an example of public ownership of a monopoly?

Table 15-21 Tommy's Tie Company, a monopolist, has the following cost and revenue information. Assume that Tommy's is able to engage in perfect price discrimination. -Refer to Table 15-21. If the monopolist can engage in perfect price discrimination, what is total profit at the profit-maximizing quantity?

What is the defining characteristic of a natural monopoly? Give an example of a natural monopoly.

Scenario 15-7 Black Box Cable TV is able to purchase an exclusive right to sell a premium movie channel PMC) in its market area. Let's assume that Black Box Cable pays $150,000 a year for the exclusive marketing rights to PMC. Since Black Box has already installed cable to all of the homes in its market area, the marginal cost of delivering PMC to subscribers is zero. The manager of Black Box needs to know what price to charge for the PMC service to maximize her profit. Before setting price, she hires an economist to estimate demand for the PMC service. The economist discovers that there are two types of subscribers who value premium movie channels. First are the 4,000 die-hard TV viewers who will pay as much as $150 a year for the new PMC premium channel. Second, the PMC channel will appeal to 20,000 occasional TV viewers who will pay as much as $20 a year for a subscription to PMC. -Refer to Scenario 15-7. What is the deadweight loss associated with the nondiscriminating pricing policy compared to the price discriminating policy?

Suppose most people regard emeralds, rubies, and sapphires as close substitutes for diamonds. Then DeBeers, a large diamond company, has

When a monopoly increases its output and sales,

Figure 15-16 -Refer to Figure 15-16. Which triangle represents the monopoly deadweight loss?

For a monopolist, when the price effect is greater than the output effect, marginal revenue is

Table 15-2 Tanya has the following demand curve for selling taffy. Assume that Tanya has a marginal cost of $3 per unit. -Refer to Table 15-2. What is Tanya's profit-maximizing level of output?

Patent and copyright laws

Marginal revenue can become negative for

Table 15-3 Consider the following demand and cost information for a monopoly. -Refer to Table 15-3. To maximize profit, the monopolist sets price at

The deadweight loss for a monopolist equals one-half of its profits for any given level of output.